The Supreme Court has held that a development authority cannot deny the benefit of its “Zero Period Policy” merely because a developer had some physical access to the allotted plot when the authority failed to provide the effective and legitimate access contemplated under the lease deed and sanctioned building plan.

The bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe observed that easy and adequate access to a commercial plot is materially different from the availability of a limited route that merely allows a developer to reach the land or carry out minor construction.

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The Court said that a development authority cannot escape its obligation to provide proper access by contending that the developer had somehow managed to reach the plot and undertake limited work.

“If adequate access was not provided for reasons attributable to NOIDA, then the benefit of the Zero Period Policy cannot be denied, least of all on the ground that some access was available,” the Court observed.

The Supreme Court dismissed the appeals filed by the New Okhla Industrial Development Authority and upheld the Allahabad High Court’s decision granting the Zero Period benefit to the developer.

The dispute arose from a commercial plot allotment scheme introduced by NOIDA in September 2011.  A lease deed was executed on January 11, 2012, for a total consideration of approximately Rs. 133.86 crore. Possession of the land was handed over on the same day.

Under the approved site plan, the commercial plot was shown as having a 45-metre-wide front road and a 24-metre-wide side road. The developer was required to construct a commercial complex that could accommodate shopping malls, retail outlets, hotels, restaurants, showrooms and offices.

According to the developer, meaningful construction could not proceed because the proposed 45-metre front road was encroached upon, while the 24-metre side road was sandy, unpaved and non-motorable.

Construction was also affected by an interim order passed by the National Green Tribunal in September 2013 prohibiting construction within 10 kilometres of the Okhla Bird Sanctuary. The subject plot was situated within 600 metres of the sanctuary’s boundary.

The restriction continued until August 19, 2015, when the Central Government notified the applicable eco-sensitive zone limits.

In March 2016, NOIDA formulated its Zero Period Policy to provide relief where construction or development was prevented by circumstances such as litigation, encroachment, law-and-order problems or non-availability of an access road.

Clause 5 of the policy covered cases where possession had been handed over and the lease deed executed, but construction or development remained impossible because no access road was available.

The developer sought the benefit of the policy on two grounds: the NGT’s restraint order and the absence of proper access through the 45-metre and 24-metre roads.

NOIDA granted limited relief for the period affected by the NGT proceedings. However, it rejected the developer’s claim based on the absence of access roads, maintaining that sufficient access to the plot was available.

A Tehsildar’s report submitted in February 2019 found that the land earmarked for the 45-metre front road was recorded as “Abadi” land, had never been acquired by NOIDA and remained occupied by an old habitation. The report stated that the access road leading to the commercial plot was blocked.

Although NOIDA rejected the developer’s request, subsequent official inspections continued to confirm that the promised 45-metre front road had not been provided.

The Uttar Pradesh Real Estate Regulatory Authority also recorded that the 24-metre road was completed only in 2020, almost eight years after the plot was allotted. It further noted that the 45-metre road had not been constructed because of the habitation existing on the proposed road.

NOIDA’s Additional Chief Executive Officer similarly acknowledged in a 2021 inspection report that the 45-metre road could not be constructed due to acquisition issues and habitation in the area.

A Deputy Collector’s report issued in February 2023 confirmed that the land fell in Khasra No. 684 of Village Chhalera Bangar and continued to be recorded as inhabited land. The report added that its acquisition did not appear feasible without the consent of the landowners.

During the dispute, NOIDA cancelled the lease deed in June 2022 on the ground that the developer had defaulted in paying lease rental. The Allahabad High Court stayed the cancellation pending the State Government’s decision in revision.

The State Government subsequently partly allowed the developer’s revision. It granted a waiver of penal interest and a one-year extension relating to the Covid-19 period. It also directed NOIDA to facilitate revision of the building plan in accordance with the actual position of the land.

Since the 45-metre road was not likely to become available, the developer submitted a revised site plan proposing that the 24-metre side road be treated as the project’s frontage.

NOIDA rejected the revised plan, claiming that technical objections had not been answered. It thereafter raised a demand of Rs. 100.39 crore towards the balance principal and premium.

The developer challenged the denial of the Zero Period benefit, rejection of the revised building plan and the fresh demand before the Allahabad High Court.

The Allahabad High Court found that the 45-metre road was encroached upon and that NOIDA had not taken effective steps to remove the obstruction or provide the promised access.

It held that the developer’s case fell within the Zero Period Policy because the absence of proper access prevented development in accordance with the sanctioned plan.

The High Court directed NOIDA to issue a fresh calculation after granting the Zero Period benefit. The developer was directed to pay the resulting balance within eight weeks, following which NOIDA was required to consider and approve the revised plan in accordance with law.

NOIDA challenged that ruling before the Supreme Court.

The Supreme Court rejected NOIDA’s argument that Clause 5 should be strictly and literally interpreted and applied only when there was absolutely no physical access to the allotted land.

The Court held that the terms of an administrative policy cannot always be interpreted in the same manner as statutory provisions. Courts must consider the policy’s purpose as well as the broader objective it seeks to achieve.

The Zero Period Policy was formulated to protect developers from the serious financial consequences of paying instalments and accumulated interest when construction was stalled by circumstances beyond their control, the Court explained.

Clause 5 was therefore intended to ensure that a developer had easy, effective and legitimate access to the allotted plot and could proceed with construction.

The benefit could not be refused merely because a developer had struggled to gain limited access and managed to keep some construction activity going.

The Supreme Court emphasised that elevation and frontage in a commercial real estate project are not merely matters of architectural appearance.

Frontage determines the visibility, accessibility, marketability and commercial attractiveness of the project. It directly influences customer footfall, branding, investment expectations and the business prospects of prospective occupants.

The original sanctioned plan treated the 45-metre road as the principal frontage. Since that road was unavailable, the project required substantial reconsideration, including changes to the building’s orientation, setbacks, entry and exit points, configuration and frontage.

The Court observed that converting the 24-metre side road into the principal frontage was not a minor internal modification. It fundamentally affected the project’s development potential and required a revised building plan.

The developer could neither be compelled to continue construction under a plan based on a road that did not exist nor be made financially liable for NOIDA’s failure to fulfil its obligation.

The Court consequently held that NOIDA’s denial of the Zero Period benefit and its continued refusal to sanction the revised site plan were unreasonable and legally unsustainable.

While affirming the Allahabad High Court’s judgment, the Supreme Court recorded the developer’s statement that the project would be completed within four years from the approval of the revised site plan.

The developer also undertook to pay the outstanding amount in eight instalments.

The Court directed NOIDA to take note of the undertaking and issue the necessary directions for commencement of the project under revised payment schedules.

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